What evidence in the income statement confirms that Accrual accounting is in use?

The presence of accrued expenses in the income statement serves as a clear indication that accrual accounting is being utilized. Accrual accounting recognizes revenues when earned and expenses when incurred, regardless of the actual cash transactions. When a company incurs expenses that have not yet been paid by the end of the accounting period, these expenses are recorded as accrued expenses. This reflects the obligation to pay for services or goods that have already been consumed or received, aligning with the accrual basis of accounting.

By recognizing accrued expenses, the income statement presents a more accurate picture of the company's financial performance during a specific period, as it accounts for all expenses related to that period, not just those that have been paid in cash. This approach helps in providing stakeholders with a transparent view of the company's obligations and the financial results from operations.

In contrast, revenue from sales does not specifically indicate accrual accounting since it can also be recognized under cash accounting if the cash is received at the time of sale. Prepaid expenses pertain to payments made in advance for services yet to be received, which would not reflect current liabilities. Dividend payments pertain to distributions of profits to shareholders and do not relate to the accounting for revenues or expenses. Thus, among the options, accrued expenses are the